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When an individual sells their home, subject to rules on size and use, ordinarily any gain on sale is exempt from Capital Gains Tax (CGT).  The relief is provided through legislation under Section 222 TCGA 1992:

Relief on disposal of private residence

• This section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in- A dwelling-house or part of a dwelling-house which is or has at any time in his period of ownership been, his only or main residence.

In some cases, there can be uncertainty as to whether a particular residence is the “only or main residence” e.g., there is more than one residence.  Where there is more than one property falling under Section 222 above it is open to the individual to elect which one should treated as the only or main residence for the purposes of the relief.  The time limit for an election to nominate a particular property is within 2 years from the date 2 properties both qualify for the relief.  The election will be deemed to remain in place until the earlier of the date on which the individual’s combination of residence changes, or the date from which a variation of the original notice is to apply.

Other than in cases of deemed residence- see below:

• S222(8) TCGA92 where an individual is currently living in job-related accommodation, 
• S223(3) TCGA92 during specific periods of absence, 
• S223ZA TCGA92 where there is a delay in taking up residence, S223ZA TCGA92 applies to disposals on or after 6 April 2020. Disposals before this date are dealt with under ESC D49,
• S225B TCGA92 where an individual transfers the marital home or an interest in the marital home to his or her spouse or civil partner following separation, see S225B TCGA92, applies to disposals on or after 6 April 2009. Disposals before this date are dealt with under ESC D6.

It is a requirement that the property is occupied and where a valid notice is not made HMRC will seek to establish which property is the only or main residence based on the facts of the case.  HMRC’s manual on CGT provides a useful checklist of the likely items that will be considered in determining occupation:

• For each dwelling-house, what is the is the timeline of events from the date of acquisition until the date of disposal? When was the dwelling-house first used and last used as a residence? It may be necessary to look at periods before the first use or after the last use e.g., where the individual was living at someone else’s property.

• If the individual is married or in a civil partnership, where did the family spend its time? Spouses or civil partners who are living together can only have one main residence between them.

• Are there any dwelling-houses owned solely by the spouse or civil partner that also need to be considered?

• Is the size and location of the dwelling-house suitable for it to be the main home of the family according to their size and lifestyle?

• How many rooms are there?

• How was it furnished?

• If the individual has children, where did they go to school?

• Where was the individual’s place of work? Where was their spouse or civil partner’s place of work?

• Where was the individual registered with a doctor/dentist?

• At which residence was the individual and their spouse, or civil partner, registered to vote?

• Which address was used for correspondence?

• Banks & Building Societies

• Credit cards

• Utility bills

• HMRC and other Government departments

• At which address was the individual’s car registered and insured?

• Which address was the main residence for council tax? Were there any council tax exemptions in place, such as for the dwelling-house being uninhabitable or a second residence?
• Does the utility bill usage suggest that it was occupied as the main residence of the individual and their family?

Where an individual or a legally married couple genuinely has more than one property that qualifies as a private residence the option to elect as to which property is the only or main residence for the purposes of Private residence can provide a useful planning opportunity.  

If readers require any further assistance to establish their entitlement to Private Residence Relief please do not hesitate to contact us on 01902 711370 or email enquiries@uklandlordtax.co.uk.

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG